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Indices

Tuesday, November 15, 2016

INDICES:

INDICES:MEDIUM TERM REVERSAL:END OF WAVE-X RALLY: EXPECTING WAVE-Y OF II DOWN BEFORE WAVE-III UP STARTS:LONG TERM VIEW ABOUT INDIAN EQUITY BULL MAKRET REMAINS INTACT:OPPORTUNITY TO MEDIUM TO LONG TERM INVESTOR TO BUY STOCK SPECIFIC & RESTRUCTURING OF PORTFOLIO IN THIS CORRECTION:

Nifty & Sensex both has closed monthly in negative territory on 30.09.2016. It was a first sign or very advance sign of medium term trend reversal & also to conclude recent rally post budget Feb 2016 as wave-X as per chart attached.I have mentioned about such possibility many times in market outlook update but it was not my preferred one till confirmed by price reversal.

I was having primary assumption of missing wave-V for rally since Feb 2016 (Post budget) from bottom of around 6825.80 levels on nifty & 22,494.61 levels on sensex. But after medium term reversal, itís now conclusive enough to take rally post budget 2016 as wave-X rally as per chart attached.

Itís also look repetition of similar pattern like 2010-2013 corrective phase as per chart attached. Both this cases, market failed to make new high in first attempt after completion of dipper correction. We may see similarly one more wave-Y of II down for lower levels targets in medium term before wave-III up begins for higher levels targets as per chart attached.

Nifty & Sensex main indices made a high of 8968.70 & 27,716.78 levels respectively in this wave-X rally. These indices have started slow correction after September but other indices (such as Midcap & Small cap) & Bank nifty were still outperforming. It was showing negative divergence with main indices (i.e. Sensex/Nifty). Its first sign of caution that I rose in market outlook but it was not a conclusive fact to call TREND REVERSAL till itís proven otherwise. Because we have seen in 2014-15 such kind of negative divergence between sensex/Nifty & broader market lasted almost for 12-15 months & in such period many midcap & small cap stocks rallied significantly. Therefore, itís advisable to keep in mind such kind of negative divergence but wait for price confirmation to conclude final trend reversal. Its typical bull market corrective phase i.e. TOUGH TO ACT BUT ITS REAL FACT thatís what I learned in recent bull market.

Medium term outlook for the market remains negative till nifty & Sensex trades below 8737 & 28,257 levels respectively & expecting targets in the range of 7600-7300-7000 for nifty & 25000-23900-23100 levels on sensex. Let see market achieves how many of medium term targets levels in this wave-Y of II final correction. One can expect beginning of wave-III up of Long term bull market for higher levels targets after completion of this correction.

Itís a typical bull market correction in which Stock specific up trend will also continue in spite of being negative view on main indices (Sensex/Nifty). One should keep stock specific approach in this correction.

Long term outlook & assumption of Indian equity Bull market still remains intact till nifty & sensex trades above 6339 levels & 21,207 levels respectively. The overall wave counts of other indices such as Midcap, small cap & bank nifty is varying at current levels of market & will create confusion rather consensus to form overall view. I will review & update it in market outlook column at periodical interval, till that one should focus on main indices ( Sensex/NIFTY) wave count for this view.

I would also recommend to book profit stock specific profit at current levels. One should also use this correction as opportunity to BUY outperforming stocks in systematic way. One can also restructure their portfolio in this correction for investment perspectives.

Reasons may be any such as FED, Demonetisation of currency, Liquidity crunch or USD/INR for this correction but the fact of overall Long term Indian equity bull market still remain intact. Investor should grab this opportunity to participate in market from medium to long term perspectives.